A simple way to slash your overdraft and personal loan interest costs

New research from Moneycomms shows that customers with the big banks could make massive savings on their loan and overdraft costs – simply by making use of the money transfer facility offered by a handful of credit card providers.

The money transfer facility is currently offered to new customers by MBNA, Virgin Money and Tesco Bank gives borrowers the opportunity to clear costly overdrafts and smaller personal loans and save hundreds of pounds in interest in the process.

A money transfer gives you the flexibility to transfer funds from the card to your current account with a low one off transfer fee – for example the current offer with the MBNA Platinum card it is just 1.49% with 0% interest for 32 months.

If you’re credit rating is in good order then this option gives borrowers the chance to wipe out that nagging and expensive bank overdraft once and for all.

The latest research shows that those permanently in the red by £1,000 could be paying as much as £365 per year for the privilege. The 32 month 0% money transfer option gives you the opportunity to clear the £1000 balance at a total cost of just £14.90 (Money Transfer Fee).

If you’re financially disciplined, 12 monthly payments at £84.58 or 24 months at £42.29 would see your £1000 overdraft totally cleared and without paying a penny in interest.

It’s also a much cheaper option than a personal loan if you’re only looking to borrow a relatively small sum.

The MBNA money transfer option along with peer to peer providers Zopa and RateSetter offer by far the cheapest options for a loan of £3,000 – streets ahead of the 20% plus APR charged by some of the big high street banks.

Even though there is a personal loan price war going on at the moment, the ultra-low 3.5% APR rates are only on offer if you want to borrow £7,500 or more whereas the average rate if you want to borrow £3000 is more than for times that, with Lloyds Bank advertising a rate of 24.9% APR